The vast profits being made by Britain’s top lawyers will be laid bare in a report to be published tomorrow which shows the leading 100 firms sharing revenues of £9.11bn and profits of £2.7bn.
In response to mounting concern that lawyers are putting profits before ethics, the Law Society is planning to impose tough new professional conduct rules on the industry.
The move follows a number of scandals in which City law firms have been accused of over-charging clients or acting in the face of clear conflicts of interest. The new rules are expected to be approved by the Law Society at a meeting of its ruling body next month.
The latest illustration of lawyers’ earning power – drawn up by Legal Business magazine – shows that top-earning solicitors can take home as much as £1.2m a year. Total revenue and profits for the biggest firms have more than doubled in the past six years.
Six UK law firms – widely known as the “Magic Circle” – dominate the UK legal market: Slaughter and May, Freshfields Bruckhaus Deringer, Linklaters, Allen & Overy, Clifford Chance and Herbert Smith between them generated total revenues of £3.6bn in the 2003-2004 financial year. They account for 40 per cent of all legal spending within the Legal Business 100.
There is no suggestion that lawyers at these firms are over-charging.
According to the magazine a partner working at Slaughter and May could earn up to £8.8m over the next five years. Partners at Linklaters are expected to take home £6m, while those at Allen & Overy could make £5.7m over a five-year period.
The Legal Businesssurvey also names the highest-earning solicitor as Alastair Dickson, a founding partner of the Scottish law firm Dickson Minto. The private equity specialist earned more than £1.2m last year. The survey found that three other UK-based firms also generated partner profits of £1m or more a year. They were Dibb Lupton Alsop, Slaughter and May, and Richards Butler (whose millionaire partners are based in Hong Kong).
No criticism is levelled against those named in the survey.
However Menzies Campbell, the Liberal Democrat front-bencher and a barrister, said: “Figures like these will once again create a focus on the legal profession and its rewards. At the same time that some lawyers are earning over £1m per annum, there are some firms giving up legal aid because it is simply uneconomic. The legal system must serve society otherwise greater regulation is inevitable.”
The new Law Society code will make it more difficult for lawyers to continue to represent clients where there is a potential conflict of interest. Many City law firms act for both sides in commercial transactions by using a system of “chinese walls” whose purpose is to stop lawyers swapping confidential information. In June the leading law firm, Freshfields, despite maintaining a proper chinese walls policy, was blocked from acting for Philip Green in his takeover bid of Marks & Spencer. The High Court in London ruled that there was a serious risk of conflict of interest after hearing evidence that the retailer was a former client of Freshfields who were in possession of confidential information about the business.
For the first time there is to be a specific rule setting out when it is a breach of the code to ignore a conflict. Solicitors who continue to behave unethically face disciplinary action that can lead to fines or being stripped of the right to practise.
Clifford Chance, the world’s biggest law firm and the first to claim a £1bn turnover, was embroiled in a billing scandal two years ago. A leaked memorandum from junior lawyers at the firm’s New York office to their partners complained about the unacceptable pressure they face to bill 2,420 hours a year.
They complained that the pressure encouraged them to “pad” their billable hours. The firm denied that its lawyers “padded” their hours, and swiftly distanced itself from what it said was not a “UK issue”. A consultation document published by the Law Society earlier in the year said the new rules were “essential in obtaining and keeping the trust of the public and the Government.”